The Sri Lankan government is now negotiating with Indian authorities to acquire at least 16 to 20 oil tanks under a strategic plan to develop the Trincomalee oil tank farm, official sources said.

16 of the 85 remaining oil storage tanks in Trincomalee will be developed to set up a bulk storage facility for fuel in Sri Lanka exploiting the sharp drop in the world market oil prices, a senior official of the Ceylon Petroleum Corporation (CPC) said.

This plan is to be jointly implemented by Ceylon Petroleum Corporation (CPC) and Lanka IOC.

The Government is in talks with India to reclaim several oil tanks in Trincomalee. Energy Minister Udaya Gammanpila said adding that India has responded positively to Sri Lanka’s intention to acquire the oil tanks.

He said that intense talks are underway with the Indian High Commission in Colombo in this regard.

Despite disputes on the lease agreement of the tank farm tainted with legal issues and protests of trade unions, a new venture has been proposed between CPC and Lanka IOC under the new strategic plan of the new government, he disclosed.

The Indian government is agreeable to this plan and Lanka IOC has been informed accordingly, he said adding that 20 out of 84 tanks would be developed during the first phase of the proposed venture.    

He noted that the Cabinet of Ministers has approved a Cabinet paper on “Rehabilitation and development of upper oil tank farms (UTF) by CPC and to hand over the title and the ownership of 16 oil tanks of this farm to the CPC."

The tank farm agreement was signed between the then Treasury Secretary, CPC and LIOC on 07 February 2003 and the LIOC took over the possession of 99 tanks at Trincomalee tank farm for a period of 35 years.

For the past 14 years, LIOC has been paying lease charges of USD 100,000 for the tank farm in accordance with the agreement even though the lease deed had not been executed by the CPC and the government due to unknown reasons, a senior official of the ministry said.

He noted that the LIOC is agreeable for the business plan to jointly develop the Tank Farm but there was no agreement on the handing over of some oil tanks to the CPC. A significant investment of around USD 300 million will have to be made to rehabilitate the UTF and it has also suggested developing the oil tank farm jointly by the CPC and LIOC, he disclosed.

“The Sri Lankan government has ‘burnt figures’ by taking a Cabinet decision to acquire several fuel tanks out of the 84 tanks at the UTF which have not been put into use so far and it was in a dilapidated condition," a veteran expert in the Petroleum sector told the Lanka News.

The government has no option other than to withdraw from the cabinet decision while reaching a consensus on this matter following consultations and compromise with the Indian government and the LIOC, he pointed out.